Alphabet shares slide 10% after $111.2 bn sales miss

Alphabet reported $111.2 billion in third-quarter sales excluding payouts to partners on Oct. 29, below analysts’ projections, while services revenue was $96.3 billion versus $98.4 billion expected, Moneycontrol/Bloomberg reported.

The shortfall sharpened scrutiny of Alphabet’s July guidance for as much as $205 billion in 2026 capital expenditures, more than double last year, as shares slid 10% in late trading Wednesday.

Search and related advertising, roughly half of Alphabet’s overall sales, also missed forecasts and grew at the slowest pace in five quarters. YouTube advertising revenue was $11.2 billion, also short of projections.

“This quarter feels like a moment of truth for Alphabet: Either Pichai and his team fix the way the company monetizes AI, or the giant risks losing its leadership in several of its core businesses in the near future,” said Thomas Monteiro, senior analyst at Investing.com.

Alphabet Chief Business Officer Philipp Schindler told investors on an earnings call late Wednesday that AI Mode, a new tab in Google Search, weighed on results because those queries have “lower monetization.” Schindler said the company was optimistic and planned to bring more advertising to that part of search.

The tension for Alphabet is that artificial intelligence is both a defensive expense and a growth bet. Google is rebuilding products including search, YouTube and Gmail with AI features, while also expanding data centers to support consumer use, corporate demand and internal workloads.

Those investments are increasing long-term obligations. By the end of the third quarter, Alphabet’s future commitments for resources including computing power and energy totaled $924 billion, while data-center leases not yet started reached $152 billion, taking future obligations above $1 trillion.

Alphabet posted negative free cash flow, cash left after capital spending, for a second consecutive quarter. “Search still generates the bulk of Alphabet’s cash, and two straight quarters of negative free cash flow show the pure AI math isn’t working right now,” said Anders Bylund, contributing tech analyst at the Motley Fool.

Earnings were also hit by equity investments. Alphabet recorded an $8.7 billion loss on those stakes, largely tied to its SpaceX position, reversing gains from a year earlier and a second-quarter windfall driven mainly by SpaceX and a private company later identified by Bloomberg as Anthropic PBC.

Net income was $2.12 a share in the third quarter, below Wall Street’s estimate of $2.99. That gap added to investor concern that higher AI-related spending and investment losses are pressuring the company’s cash generation and reported profit.

Google Cloud was the main counterweight. The division posted $30.7 billion in revenue and $11.1 billion in profit, beating analyst estimates of $29.1 billion and $9.8 billion, respectively.

The cloud unit is a measure of external demand for Alphabet’s AI products and hosting services. Its customers include startups such as Anthropic, which also compete with Google in AI assistants, underscoring the mixed economics of selling infrastructure to rivals while defending consumer search.

Google has been trying to keep users inside its search ecosystem as chatbots from OpenAI and Anthropic gain traction. The company now provides AI-generated answers for many searches, a change with consequences for businesses that depend on search traffic and advertising revenue.

Source: news report, Moneycontrol/Bloomberg, Oct. 29, 2026